One thing you notice when you watch a lot of golf on tv is that the same commercials are repeated over and over ad nauseum. This past week was no exception. I must have seen the ING Your Number commercial at least 10 times. Clearly their marketing tactic worked, because I did indeed go to their website.

The premise of the commercial is that everyone has a number that correlates to the amount they’ll need to have saved to retire when and how they want. In the ad, people are carrying around a physical number. By going to the website, you can calculate your number and then find a new financial professional in your area or email it to your existing one.

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Although your 401(k) is better than not saving for retirement, your investment options there are limited to the offering of your particular plan. You likely have a dozen or less funds to choose from. The likelihood of those offerings being the ones you would have chosen given choice over all investment options is basically zero.

So my retirement investment allocation goes along these lines: Make getting the company match on your 401(k) retirement investment priority number one. Even with poor choices in your 401(k), the company match is free money. If your company match gives you fifty cents on the dollar, that’s a 50% gain on your investment regardless of the performance. Better matching means even better gains. So contributing enough to get the full company match is a no-brainer.

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If you’re not careful, you might not get the maximum from your company’s 401K match. No, I’m not talking about contributing too little to get the full match, I’m actually talking about contributing too much to get the full match.

Here’s the problem:
There are contribution limits to your 401K set at $15,500 for 2008 ($20,500 if your 50 or older).

Let’s assume that your company

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The contribution limits for Roth and Traditional IRAs for 2008 are:
$5,000

The Catch up provision brings the limit up to $6000 for people aged 50+.

Note that those with high incomes may have reduced limits for Roth contributions. Married couples with adjusted gross incomes above $160,000 can’t contribute to a Roth, for instance.

401K Contributions Limits for 2008 are:

$15,500

The Catch up provision brings the limit up to $20,500 for people aged 50+.

Investing in your retirement is a smart thing to do. As defined benefit plans give way to defined contribution plans, the onus of retirement is more and more in our own hands. Gone on the days when being a faithful company man meant that you’d be taken care of in retirement.

Something to remember though, is that there’s more to investing than just retirement. Having a healthy mid-term investment portfolio is also important. If you’re young, it may be even more important than retirement savings. Just like disability insurance is more important than life insurance when you’re young, so too is non-retirement investing.

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Many companies are transitioning their retirement programs from defined benefit plans, such as pension plans, to defined contribution plans, such as 401Ks. This puts the employee in a much more active situation. Instead of paying a fixed amount and having a predetermined, and guaranteed benefit, you decide how much to put in to your plan. You must also manage your account to ensure that it performs well. You have no guarantees and the lifestyle you’ll be able to afford in retirement is entirely up to you.

Most companies that offer 401K plans to their employees also offer some kind of company matching. They may give you a dollar for dollar match, a 50 cents on the dollar match, or similar up to a certain percentage.

Whatever amount you contribute to you 401K, you should contribute at least enough to get the full company match. This match is basically free money that can add significantly to your portfolio gains. Imagine you put $1000 into your 401K and your company matched 50%. The match could make up for otherwise poor performance. Even if your portfolio didn’t appreciate over the course of a year, on your investment of $1000, your account would be worth $1500 thanks to the match, which amounts to a sizable 50% gain.

If the portfolio did appreciate, the gain would be even larger. The extra funds from your company match will continue to grow as the interest compounds between now and when you make withdrawals at retirement. There may be no such thing as a free lunch, but company matching is about as close as you can get.